The ruling of the Supreme Court last week reinforces the position that in determining the employment status of an individual, the courts will look beyond contractual terms to see the actual reality of the relationships between the parties.
The case involved 20 claimants, all of whom were engaged by Autoclenz as valeters and issued with standard contracts indicating that they were “self employed sub-contractors”. The claimants were paid gross, expected to account for their own tax and NI and did not receive rights as workers in relation to matters such as holidays and the National Minimum Wage. In 2007, Autoclenz introduced some new clauses to these terms one of which stated that “you will not be obliged to provide your services on any particular occasion nor, in entering such agreement, does Autoclenz undertake any obligation to engage your services on any particular occasion”. Clauses which were presumably designed to further strengthen that the contract was a self employed arrangement.
The claimants sought a ruling that they were ‘workers’ and therefore entitled to worker rights such as the National Minimum Wage and rights under the Working Time Regulations 1998. The Supreme Court agreed with the initial ruling of the Employment Tribunals that the contract did not reflect the true agreement between the parties, and therefore focused on the question of whether the actual legal obligations of the parties involved were accurate and genuine. The Supreme Court found that the valeters were obliged to carry out the work offered to them, paid for doing that work and they had to provide their services personally (despite there being a clause in their contracts that they could provide a substitute to do so). Therefore, the contract was not a true reflection of the relationship and the valeters were workers and entitled to the rights as claimed.
Although the ruling involved a direct engagement rather than a tripartite agency relationship, it is the most recent in a long series of employment status claims and authority from the highest court in the land that in order to establish an individual’s employment status and what rights may or may not exist between parties to a contract, it is not just the contract itself that must be examined but the practical reality also.
This underlines the importance of ensuring that the correct contract is used in all engagements of workers and that the contract in place reflects the true relationships between the parties.
For assistance with contract terms or more advice on employment status contact Lawspeed on 01273 236 236.